Dubai diamond traders lay bare Mehul Choksi's fraud
Mumbai: Top officials of the Dubai Multi Commodities Centre have nailed Mehul Choksi by disclosing the fugitive diamond merchant’s dubious dealings across Asia.
In a 125-page chargesheet submitted to a Mumbai Court, the Enforcement Directorate (ED) explained in detail how Choksi and his brother Chetan - immediately after the ED filed a criminal complaint this February, 2018 - visited Gitanjali’s outlet in Dubai’s DMCC complex to pick up jewellery and cash.
Dion Lily White, vice president of Gitanjali Ventures DMCC, Dubai, told the ED in a statement that $13 million worth of studded jewellery was in the locker, and another $3 million worth of jewellery was stored in local retail outlets in Dubai. Besides, AED 2 million was stashed away in a locker.
ED said Chetan put “pressure on staff to handover the said goods (jewellery) to him”.
But the move failed as officials of Gitanjali Dubai - by then aware of developments in India - refused to part with the jewellery and cash. Eventually, it was left to the officers of the ED to visit Dubai to it pick up the consignment.
But what shocked the ED officials was the quality of the jewellery. When the ED officials went to attach the consignment, diamond experts in Mumbai told them the booty was worth Rs 100 crore. This was not all. In the prosecution complaint, the ED says Mehul maintained poor quality of stock in his warehouses. In his Hyderabad SEZ, Mehul claimed he had jewellery worth Rs 3,840 crore, but the real value was only Rs 103 crore, less than 3 per cent of the declared value. Worse, goods from Mehul’s homes across India were initially valued at Rs 1280 crore as per the diamond merchant’s papers but the valuation by the ED has put the value at Rs 597.75 crore, a difference of 47 per cent of the total booked value.
In comparison, the ED said the real value of Nirav’s jewellery was 27 per cent of the total declared value. As per the prosecution complaint filed by ED, the proceeds of crime against Mehul is Rs 6,097 crore (Rs 3011.39 crore of LOUs plus Rs 3,086.24 crore of Foreign LoCs). Last week, the ED chargesheeted 14 accused under Section 45 of the PMLA Act, 2002. Those named in the chargesheet were Mehul Choksi, Gokulnath Shetty, Nehal Modi, Vipul Chitalia, Dharmesh Bothra, Rakesh Gajera, Sunil Varma, Deepak Kulkarni, Jayesh Shah, and others. As per the chargesheet, Mehul was the prime conspirator who shaped plans to cheat banks.
Mehul, claimed the chargesheet, used Air to Air export using his Gitanjali Group of companies in India and abroad. In short, export consignments from India to Hong Kong or from Hong Kong to India were routed through Dubai, but were not cleared through customs at UAE airport. Gitanjali Ventures DMCC and Asian Diamonds Jewelery FZE were used for laying, claimed the chargesheet. “This akin to transhipment or bond to bond transfer without goods actually being brought to Dubai. Thus, the goods were being routed through UAE to create additional layering in money laundering,” the chargesheet said. To hoodwink the customs officials, Mehul had ordered his overseas entities to split the quantity into more than one consignment on export invoice before it was exported to the next destination.
The chargesheet further said Mehul took undue advantage of the RBI guidelines pertaining to third party payment system against export and used his overseas entities to defraud the banks. “This system was misused to avoid detection of contra sales and purchases with the beneficiaries of LoUs and FLCs and bring back the funds directly into Gitanjali Group of companies in India,” the chargesheet said.
The ED chargesheet further said Nehal, brother of Nirav Modi, received proceeds of crime in the guise of royalty, advances from the shell companies of Mehul. “Nehal Modi, who is the CEO of USA-based Samuels Jewelers INC., and Diamlink Inc, was involved in receipt of Proceeds of Crime (PoC) in the guise of royalty agreement with the Dubai-based sale companies of Choksi", the chargesheet stated.
Mehul, claimed the chargesheet, diverted major funds to his banks through shell companies. For the records, the chargesheet said Mehul bought a Rs 27 crore worth villa in UAE and transferred Rs 15 lakhs to his account from Gitanjali Venture DMCC, in the "guise of professional fees". The maintenance and other charges for the villa were paid by Gitanjali Ventures DMCC only. In another case, Samuel Jewellers and Al Arba Jewels, FZE, shell companies of Mehul had a royalty agreement from 2014 to 2017 to divert the funds generated from the scam. Al Arba, chained the chargesheet, paid annual royalty to Samuels Jewellers to the extent of 7 per cent of the net sales with a guaranteed minimum annual royalty of $68,00,000 that is earned on the first day of each year. Using these shell companies, Mehul diverted Rs 125 crore from Dubai, during March 2015 to 2017. Further, dubious market operators in Dubai rotated funds worth Rs 32 crore on commission basis for Mehul during 2014-15.
The chargesheet further explains how Mehul used two Mauritius-based companies, Mauli Ventures and Project IOI (Mauritius) Ltd., to divert the funds in the guise of loans and financial support. Besides this, the third party remittance system was also used in Dubai by Choksi to
Mehul also diverted these funds to his company in India through one Rakesh Gajera, a trusted associate. In 2015, an estimated $20,00,500 was transferred to the account of Eternity Jewels, a shell company of Mehul and then the same cash was transferred as loan to Gajera. The source of this fund was Gitanjali Ventures DMC. The following year, this same cash was used to purchase the 5.75 per cent equity of Gitanjali Gems Ltd in the name of Gajera. The consideration paid for the purchase of equity was Rs 50 crore by Gajera to Gitanjali Gem.